Aetna Challenges Sprinkler Damage Appraisal

One of the nation’s largest insurance companies is contesting an appraisal of damage caused by a sprinkler system at a Spokane building used for college classes.

In a U.S. District Court complaint filed last week, Aetna Casualty & Surety Co. also says retired Washington Supreme Court Chief Justice William H. Williams was not competent to serve as umpire in the dispute.

Williams, who stepped down from the court in 1985, has acknowledged having Parkinson’s disease.

John Evans, president of the Inland Northwest Chapter of the Appraisal Institute, said it is rare for this type of appraisal dispute between an insurer and customer to reach federal court.

But differences between locally made valuations and those made by outside experts can be wide, he said.

The 35,000-square-foot East Trent building, which housed some Spokane Community College classrooms, is owned by Vern and Leroy Byrd. They submitted a loss claim from the Jan. 2, 1995 sprinkler system leak for $1.2 million, including $75,000 for lost rents.

“It’s a dysfunctional building,” said Vern Byrd, who declined to comment on the lawsuit.

Aetna’s engineering consultant set replacement cost at $440,000, plus $14,000 for lost rents.

The insurance policy provides for selection of an impartial umpire to resolve such discrepancies. Each side also names its own appraiser. Albert Paxton of Culver City, Calif., represented Aetna; Thomas Lacy of Spokane, the Byrds.

Lacy submitted the names of three potential umpires to Paxton, who agreed to the selection of any of the three based on Lacy’s assurances all were competent and able to endure a two-day hearing.

The hearing was held in Chandler, Ariz., Williams’ winter home, on December 6.

Both days, the complaint says, Williams was confused about the dispute, the parties involved and their witnesses. Williams told Paxton his disease affected his short-term memory.

Williams set a second hearing, but ordered briefings when he forgot that ruling. He also said Paxton was entitled to more information on the lost rents, and that could be handled at a subsequent meeting.

Instead, Lacy signed a proposed appraisal award December 7 reflecting his original $1.2 million estimate, with the allowance for lost rents increased to $90,000.

He forwarded the document to Williams, who signed it December 13. The complaint says neither Lacy nor Williams told Aetna or Paxton of the award until it was submitted for payment December 21.

The company said it had no chance to respond or submit more evidence, as Williams had ordered.

Williams has since denied a request to set aside the award and excuse himself as umpire.

The lawsuit asks the District Court to accept Aetna’s valuation of the damage, and an injunction against the award and further participation of Williams as umpire.

Contacted last week in Chandler, he defended his competency, and added that he thinks the issue remains open.